Stocks Snap Win Streak

The Federal Reserve's new stimulus program failed to excite skeptical investors, who bid stocks higher for several hours before erasing those gains to end the day largely unchanged.

Stocks pushed higher after the Federal Reserve said it would introduce new asset purchases to replace its current stimulus program known as Operation Twist, which ends this month. Paul Vigna has details on The News Hub. Photo: AP.

The Dow Jones Industrial Average finished with a decline of 2.99 points, or 0.02%, to 13245.45, snapping a five-day winning streak that had pushed the blue-chip index to a one-month high.

The Standard & Poor's 500-stock index edged up 0.64 points, or 0.04%, to 1428.48, extending its winning streak to six days. The Nasdaq Composite gave up 8.49 points, or 0.28%, to 3013.81.

Oil futures rose 1.1% to about $86.77 a barrel, while gold futures gained 0.5% to $1,716.60 an ounce. The dollar fell against the euro but jumped against the yen. Treasurys fell, pushing the yield on the benchmark 10-year note higher to 1.699%.

Stocks began the day quietly, trading roughly around the flat line ahead of the Fed's expected announcement that it would buy $45 billion in Treasurys each month, in addition to the $40 billion in mortgage-backed securities it purchases each month. The program will replace its current stimulus program known as Operation Twist, which ends this month.

However, the central bank also said that it would keep interest rates at near-zero rates as long as the unemployment rate remains above 6.5% and inflation remains in check, surprising investors who did not expect the Fed to explicitly tie its interest-rate policy to the unemployment rate.

The Fed decision sent the Dow up as many as 81 points. But blue chips relinquished those gains later in the afternoon as investors reassessed the implications of the decision.

"If they're going to keep their accommodative policy until the unemployment rate gets to 6.5%, they'll be at it for a long time," said
Keith Bliss,
senior vice president at Cuttone Co. "It's clear to me that they're trying to inflate assets and really gin up consumer spending... I expect we'll get that initial pop, but then people will step back and say, 'What is the real efficacy of this for the real economy?' And it's getting less and less with each effort."

Separately, investors continued to watch negotiations on the "fiscal cliff", a bundle of tax increases and spending cuts set to take place in the new year, provided Congress doesn't act to avert those changes. On Wednesday, House Majority Leader Eric Cantor seemed to dampen hopes of a near-term breakthrough. Late Tuesday, President Barack Obama said that he was optimistic about budget talks between him and House Speaker John Boehner.

In broad stock market action, technology and consumer-staples stocks weighed most heavily on the downside.
Wal-Mart Stores
led the Dow decliners.

Telecommunications and financial stocks pulled on the upside.
Hewlett-Packard
and
DuPont
led the gains among Dow components. DuPont announced a $1 billion stock repurchase program and adjusted its 2012 earnings outlook to the high end of the previously provided expected range.

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European markets were marginally higher after Greece's successful bond buyback. The Stoxx Europe 600 inched up 0.1% to stretch its win streak to eight sessions, and to finish at its highest level since May 2011. Greece's borrowing costs fell after bids for the debt exceeded the €30 billion targeted.

Elsewhere, an unexpected decline in euro-zone industrial production in October was offset by U.K. data showing a surprise decline in claims for unemployment benefits in November.

Asian markets were broadly higher as strong gains in U.S. markets helped fuel optimism. Japan's Nikkei Stock Average gained 0.6% to an eight-month high, while the Hang Seng Index rallied 0.8% to its highest level since August 2011.

Elsewhere in economic headlines, import prices declined 0.9% in November from the month before, marking the first decline in four months. The reading, which was lower than expected, came as softening petroleum prices helped reduce inflation pressures.

The U.S. federal budget deficit, meanwhile, widened to $172.11 billion, 25% higher than the $137.30 billion shortfall during the same month a year earlier. The reading was higher than expected.

In corporate news,
3M
slipped after the maker of consumer and industrial products affirmed its 2012 earnings outlook and provided an expected range for 2013 earnings that met current analyst estimates.

Both classes of
Berkshire Hathaway
shares rose after the company, controlled by
Warren Buffett
,
purchased 9,200 of its larger Class A shares at $131,000 per share from the estate of a long-time shareholder.

Apple
dropped after The Wall Street Journal reported the technology giant is working with Asian component suppliers to test designs for televisions, including large-screen high-resolution TVs.

Nasdaq OMX Group gained after the exchange operator agreed to acquire Thomson Reuters' investor relations, public relations and multimedia services businesses for $390 million in cash.

Facebook
shares fell on the company's first day as a member of the Nasdaq-100 index, joining as its 23rd largest component. The Nasdaq-100 collects the 100 biggest nonfinancial companies trading on the Nasdaq Stock Market.

Lennar gained after the home builder lined up a $1.7 billion loan from state-run China Development Bank for two major San Francisco-based projects, according to a report in The Wall Street Journal, citing people familiar with the deal. Rival home builders
D.R. Horton
and
KB Home
also climbed.

Eli Lilly
declined after the drug giant said it doesn't intend to submit a license application for its Alzheimer's treatment until it conducts a second Phase 3 study, which the company expects to initiate no later than the third quarter of 2013.

Molycorp
fell after the rare-earth company ousted its president and chief executive,
Mark Smith,
after five years in charge. The company named director Constantine Karayannopoulos as interim CEO until a permanent replacement can be found.

Geospace Technologies
slumped after the maker of seismic data-processing equipment used by the oil and gas industry reported fourth-quarter earnings and revenue that fell well short of analyst forecasts, citing erratic order flow and timing of shipments.

Sucampo Pharmaceuticals
climbed after the company said the Food and Drug Administration approved its supplemental new drug application for its glaucoma treatment.

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